If you’re wondering what life insurance is, it’s a contract between a person and an insurance company in which the insurance company provides financial security to the policyholder in exchange for premium payments.
The insurance provider will pay the person or his family a lump sum amount after a specific period of time if the policyholder dies or if the policy matures. There are various types of life insurance policies available to meet the demands and requirements of policyholders. Paying for a life insurance coverage may not be a top priority for most people during a recession. But it’s even more crucial to have a safety net in place for your loved ones should things go wrong.
What Are the Benefits of Life Insurance Plans?
Once you understand what Life Insurance is and the many types of Life Insurance Policies, you will notice that there are three major benefits to acquiring the finest Life Insurance Policy that you should be aware of.
1. Financial Security
Life is unpredictably unpredictable and full of unknowns. It’s tough to rule out the possibility of a sad event like death. The family is having financial troubles as a result of the lack of a continuous source of income in this situation.
2. Long-Term Savings
Insurance plans assist you in making systematic savings and developing a corpus that may be utilised for a variety of purposes, including the construction of a new home, financing superior schooling for your child, and covering a child’s marriage expenditures.
This is an excellent strategy to set and attain retirement objectives.
3. Tax Benefits
You can also gain tax benefits from life insurance plans under current legislation, such as the Income Tax Act of 1961. The Income Tax Act of 1961, Section 80C, allows for a tax deduction for paid life insurance premiums. Section 80C allows you to deduct up to Rs.1.5 lakh from your taxable income.
- Getting married
- Having a child
- Supporting aging parents
- Buying a house with a mortgage
- Taking out a loan
- Starting a business
- During a recession
Different Types of Life Insurances
- Term insurance
- Unit Linked Insurance Plans
- Endowment plans
- Moneyback policy
- Whole life insurance
- Retirement Plans
1. Term Insurance Plan
This is one of the types of life insurance policy in India that you can buy for a specific period of 10, 20, 30 or more year. While some other types of life insurance policy offer maturity benefits, term insurance does not. It is one reason why term insurance, being the best insurance policy in India, is comparatively cheaper than other types of life insurance policies.
2. Unit Linked Insurance Plan (ULIP)
A ULIP is one of the types of life insurance policies in India that fulfill both of these aspects. It is the only type of life insurance that provides both life insurance and investing opportunities. It is one of the types of life insurance that has a five-year lock-in period, making it a long-term investment product with risk protection. ULIPs also allow you to rebalance your portfolio based on market conditions.
3. Endowment Policy
Endowment policies are a type of life insurance that combines life insurance and savings benefits. These policies, in addition to providing life insurance, allow you to save money over time in order to obtain a lump sum at maturity. They are one of the most beneficial types of life insurance policies since they help people reach their long-term objectives.
4. Moneyback Policy
It is here that a moneyback policy comes into play in resolving the liquidity issue. Moneyback policies are a common type of life insurance policy in India that pays out money on a regular basis.
5. Whole Life Insurance
A whole life insurance plan differs from other types of life insurance in that it covers the insured for the rest of his or her life, up to the age of 100.
Typically, the death benefit, under a whole life insurance, you are eligible to receive a maturity benefit under a whole life insurance policy if you cross 100 years of age. Another notable aspect of such whole life insurance plans is that some allow you to pay a lower cost for the first 10-15 years while still receiving lifetime benefits.
6. Retirement Plans
Retirement Plans are you will get a sum of money as pension in the vesting period. If you pass away unexpectedly within the policy period, the death benefits will go to your nominee. You and your family are protected by retirement plans that provide both a death benefit and a vesting benefit